One Big Beautiful Bill: A Fiscal Lifeline for Medicaid, Taxpayers

The OBBBA Sets Out to Prioritize Healthcare Dollars for Those Truly in Need

The "One Big Beautiful Bill" Act (OBBBA) signed into law by President Donald Trump on July 4 is set to help pull America's healthcare system back from the brink of fiscal disaster.

In recent years, government spending on Medicaid has surged.

Between 2019, the year before the COVID-19 pandemic, and 2023, it grew more than 41%. In the fiscal year ending June 2024, Medicaid spending reached $914 billion.

Medicaid spending has surged in large part because the Biden administration used the pandemic as an excuse to boost enrollment, even among those who are ineligible for the program.

According to research from the Paragon Health Institute, there are some 5 million Medicaid enrollees claiming coverage under Obamacare's expansion of the program to able-bodied adults who don't actually qualify for that coverage.

Under OBBBA, states will now need to verify the eligibility of Medicaid enrollees every six months. That's hardly a radical policy change.

It's a slightly more rigorous effort to enforce existing law.

And yet it could save Americans billions of dollars — without threatening coverage for people who are entitled to benefits.

The OBBBA also curtails the use of provider taxes as a way for states to extract more Medicaid funding from federal coffers.

The maneuver — which all but one state have embraced — involves levying high taxes on healthcare providers and then using that additional revenue to pay those very providers more for treating Medicaid patients.

This gambit allows states to appear to lay out enormous sums on Medicaid, when in fact they're just moving money around.

Every dollar a state spends on Medicaid attracts at least one — and sometimes as many as nine — additional dollars from the federal government.

So, these provider taxes can be quite lucrative for states and healthcare entities.

The new law gradually reduces just how much states can tax providers in order to attract matching federal funds. And it freezes existing provider taxes at their current levels.

Moving forward, states that want to expand their Medicaid programs will have to shoulder more of the cost themselves.

Finally, there are the Medicaid work requirements the new law implements.

All able-bodied, working-age Americans otherwise eligible for Medicaid will soon have to engage in at least 80 hours of work, community service, education, or job-training every month in order to claim benefits.

There are plenty of exemptions to this requirement — including for pregnant women, parents with young children, and disabled people.

But for those who don't fall into these categories, it's only reasonable to ask that they use their days productively in return for health coverage courtesy of U.S. taxpayers.

Taken together, these reforms will reduce Medicaid spending by nearly $1 trillion over the next decade, compared with letting the program operate on autopilot.

But framing these changes as cuts is disingenuous. Even with them, Medicaid spending is still set to grow by 3% per year over the next 10 years.

The OBBBA dials back some of the COVID-19-era healthcare spending that Americans no longer need nor can afford — and sets out to prioritize our public healthcare dollars for those that truly need help.

Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is "The World's Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It" (Encounter 2025). Follow her on X @sallypipes. Read Sally Pipes' Reports — More Here.